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COMPLIMENTS OF 


JOSEPH 


NIMMO, JR. 


1831 F STREET NORTHWEST, 


WASHINGTON, D. C 



THE REGULATION OF COMMERCE 


THROUGH A 

DISPENSING POWER. 


Efforts of the interstate Commerce Commission to gain 
Autocratic Control of the Internal Commerce 
of the United States. 


THE POLITICAL ASPECTS OF THE aUEtjTWH: 




By JOSEPH NIMMO, Jr., LL.D. 

ronMCR CHIEF OF THE BUREAU OF STATISTICS IN THE TREASURT DEPARTMENT, AND 
lATE PRESIDENT OF THE NATIONAL STATISTICAL ASSOCIATION. 


WASHINGTON. O. C.: 

THE RUrUS H. DARBY PRINTING CO. 
1903 . 





H£z7r7 

I’lOZ 




THE LIBRARY OF 
CONGRESS. 

Two Copies Receivw 

OCT 15 1903 

Copyright Entry 

/S'- ^ 1 / 3 

cuss XJCfc N* 

6 'T 0 q 

/ COPY B. I 


NOTE BY THE PUBLISHER. 


This document, in a somewhat extended and revised 
form, will constitute one or more chapters of a volume 
which Mr. Nimmo has in course of preparation on The 
Evolution of the American Railroad System. 




THE REGULATION OF COMMERCE THROUGH A 
DISPENSING POWER. 


THE POLITICAL ASPECTS OF THE CASE 

In the entile range of current populistic thought it would 
be difficult to mention any expedient more seriously fraught 
with danger to the commercial interests or the political 
integrity of this country than the proposition to confer 
upon the Interstate Commerce Commission unlimited pow er 
to prescribe in advance the rates which shall be charged 
for transportation services on railroads and thus to exercise 
autocratic control over the internal commerce of the United 
States. Such delegation of power would necessarily devolve 
upon the National Government full responsibility for both 
the absolute and the relative prosperity of the various 
localities, States and sections of the country. Besides, it 
would overload the government with jurisdiction and in¬ 
evitably beget sectional strife such as that which the Consti¬ 
tution of the United States was mainly intended to arrest. 
The granting of the proposed power would unavoidably 
involve the creation of a fourth branch of our National 
Government, namely, A dispensing power in the united 
STATES.* As hereinafter shown this would radically 
change the character of our political institutions. It is 
not only admitted, but firmly maintained that the rail¬ 
roads should be effectually regulated, in a manner con- 

* The word dispense is employed in this article as a transitive verb, 
•ignifying to siipersvise, to control, to manage, to give out. Its deriva¬ 
tives are used in the same sense. 




4 


forinable to the exigencies of our civilization and the funda¬ 
mental principles of our governmental institutions. The 
sole object of this paper is to prove that the proposed 
remedy is fraught with evils vastly greater and more serious 
than those which it is intended to correct. 

The nature of the proposed change of national policy is 
clearly indicated by the history of the administration of the 

Act to Regulate Commerce,” approved February 4, 1887. 

The Interstate Commerce Commission was organized in 
the month of March, 1887, under the guidance of that emi¬ 
nent jurist, Judge Cooley, its first chairman. In an elabo¬ 
rate opinion, written by the chairman three months later, 
the Commission held that it was not invested with any 
power to prescribe, in advance, the rates which should be 
charged on any railroad, declaring that “ a construction of 
the statute which should require its performance would ren¬ 
der the due administration of the law altogether impractica¬ 
ble.” (Decision rendered in Louisville & Nashville Rail¬ 
road Case, May 15, 1887.) In the same case Judge Cooley 
declared, in regard to the rates charged, by the carrier, that 
“ no tribunal is empowered to judge for it until after the 
carrier has acted and then only for the purpose of determine 
ing whether its action constitutes a violation of law^ The 
correctness of this view was subsequently affirmed by the 
Supreme Court of the United States, 167 U. S., 479. It 
repels any suggestion as to the creation of a dispensing 
power. 

The Commission repudiated the idea that it had any au- 
thorrty to apply the law by preliminary judgment. (De¬ 
cided April 16, 1887.) Judge Cooley also stated in an or- 


5 


der of April i8, 1887, in the matter of the Iowa Barb Steel 
Company, that “ the Commission has not been given 
a general dispensing power to relieve hardship under the 
law, but its power in that regard is strictly and carefully 
limited.” Again he stated in a letter to J. A. Hanley of 
May 18, 1887, that Congress has not granted to the Com¬ 
mission any dispensing power, declaring that this “ would 
not be consistent with sound principles of government.” 
Besides, with respect to the popular demand for informa¬ 
tion in advance as to the application of the law, in the mat¬ 
ter of petition of Traders and Travelers’ Union, the Com¬ 
mission declared that “a moment’s reflection will show that 
no such tribunal could be properly erected.” (Decision 
rendered April 16, 1887.) 

In a leading case (Thacher v. Delaware and Hudson 
Canal Co., decided in 1887) the Commission declared that 
it has no power to fix rates in advance, but that “ its power 
in respect to rates is to determine whether those which the 
roads impose are for any reason in conflict with the pro¬ 
vision of the statute,” the decisions of the Commission he- 
ing appealable to and enforcible by the courts when judi¬ 
cially sustained. 

Judge Cooley affirmed. In re Chicago, St. Paul and Kan¬ 
sas City Railway Company case (decided in 1888), that 
“ holding the railroad companies to strict compliance with 
all these statutory provisions and enforcing obedience to 
them tends to both reasonableness and equality of rate as 
contemplated by the Interstate Commerce Act.” The cor¬ 
rectness of that opinion has been fully sustained by the 
experiences of the Commission during the last sixteen years. 


6 


Thus did the Commission at the very beginning com¬ 
mit itself fully to the doctrine that autocratic governmental 
rate-making in any form is opposed to the fundamental 
principles upon which our political institutions are founded, 
and plant itself firmly upon the solid ground of commer¬ 
cial liberty incorporated in the Constitution of the United 
States. At the same time the Commission announced 
the important fact that the Act to Regulate Commerce 
is fully adequate to the correction of existing evils. 

With its power of regulation clearly defined, its con¬ 
clusions made prima facie evidence in the courts and 
judicial co-operation with respect to both civil and criminal 
procedure fully provided for, the work of the commission 
has been eminently successful and in a high degree bene¬ 
ficial. 

But a great change came over the spirit and purposes of 
the Commission both in regard to its authority under the 
law and the method of its administration. Step by step 
it relapsed into the vagaries of autocratic rule involving 
the exercise of a dispensing power. Having in a certain 
case assumed that it was invested with a degree of judicial 
authority, Judge Jackson, of the United States Circuit 
Court for the District of Kentucky, declared January, 1889, 
that the Commission is not a court, that it is not invested 
with any judicial function, and that Congress has no power 
to invest an administrative body with the judicial func¬ 
tions (37 Fed. Rep., 567). This conclusion stands and 
will stand until the power of the judiciary—the guardian 
of personal liberty—shall have been overthrown. 

The Commission revolted at this decision, maintaining 
that with respect to administrative questions ‘fits conclu- 


7 


sions should be a finality, even though their enforcement 
may require judicial aid.” Fourth Annual Report, p. 13. 
Subsequently, in its Fifth Annual Report submitted Decem¬ 
ber 1,1891, at p3ge 21, it recommended that the court should 
be confined “strictly to the case made before the Commis¬ 
sion.” Thereupon the Commission drew a bill propos- 
ingthat Congress should grant to it the desired judicial 
authority. This bill (S. Bill 892, 52d. Cong., ist Session) 
was introduced December 15, 1891, but was rejected by 
the Senate Committee to which it was referred in view of 
Judge Jackson’s decision and the inherent absurdity of the 
proposition to invest an administrative board with the 
functions of detective, witness, party complainant and 
judge in the same proceeding. That appeared to savor too 
much of the Pooh Bah style of government. 

After the retirement from the Commission of Judge 
Cooley, and of two other able lawyers—Judge Schoonmaker 
and Hon. Aldace P\ Walker, all now deceased—the Com¬ 
mission aspired to autocratic power unfettered by judicial 
restraint. During the year 1894 (53d Congress) it con¬ 
ceived the idea that, by necessary implication of law, it is 
invested with the power to prescribe, in advance, both the 
absolute and relative rates which shall be charged on rail¬ 
roads throughout the United States. The first conspicuous 
attempt to set this assumed power in motion was in the 
case of rates between Chicago, Cincinnati and other points 
in the Western and Northwestern States and points in the 
States south of the Ohio River, as such rates are related to 
corresponding rates between Boston, New York, Philadel¬ 
phia and Baltimore at the North and the aforesaid Southern 


8 


points. The Commission issued an order prescribing both 
the absolute and relative rates which should prevail in the 
case stated. This was a manifest usurpation of authority. 
If such attempted exercise of power had been sustained it 
would have devolved upon the National Government full 
responsibility for determining the relative commercial and 
industrial prosperity of towns, cities, States and sections, 
throughout the country, and the course of its commercial 
and industrial development. The exercise of a dispensing 
power such as this would have gone directly in the face of 
elementary principles of liberty and have aroused political 
strife regarding the regulation of commerce which the 
National Constitution was mainly designed to prevent. 
The case was carefully considered by the Federal judiciary, 
being perceived to be of the highest commercial, judicial- 
and political significance. The Commission’s view was 
rejected in the lower courts and the Supreme Court of the 
United States in its decision rendered May 24, 1897, em¬ 
phatically denied that the Act to Regulate Commerce con¬ 
fers upon the Commission any such power as that claimed 
for it, either in terms or by implication. (Maximum Rate 
Case, 167 U. S., 479.) 

At the same time the court announced the following rule 
of constitutional law : “ It is one thing to inquire whether 

the rates which have been charged and collected are reason¬ 
able—that is a judicial act; but an entirely different thing 
to prescribe rates which shall be charged in the future— 
that is a legislative act.” The significance of this, as ex¬ 
plained, was that if the Commission should be invested 
with the rate-making power the courts could not review 


9 

any decision of the Coiniiiission unless it should violate the 
constitutional limit forbidding the taking of private prop¬ 
erty for public use without just compensation, or the taking 
of private property without due process of law. (Articles 
V and XIV of Amendments to the Constitution of the 
United States.) But even this limitation would leave 
abundant room for injustice and the exercise of autocratic 
power. 

In the case just mentioned the Commission again asserted 
its claim to the exercise of the judicial function, but again 
this was denied by the Supreme Court. 

This signal defeat was exceedingly distasteful to the Com¬ 
mission. Accordingly it decided to join issue with the 
Supreme Court before Congress. In its next annual report 
(submitted December 6, 1897) it recoininended that Con¬ 
gress should confer upon it the absolute power to prescribe 
rates; authorize it to issue self-executing administrative or¬ 
ders, and final administrative orders—a strictly judicial func¬ 
tion- -and compel the courts to sanction such orders. The 
Supreme Court, as before stated, had declared the power 
of rate making to be not a judicial function, and one over 
which the Federal judiciary could not and would not exer¬ 
cise any authority. The views of the Commission were 
subsequently expressed in a bill introduced in the Senate, 
January 22,1898 (S. 3354,55th Cong., 2d Session), which bill 
provided that the courts shall be required to review the 
rates, fares, classifications, &c., prescribed by the Commis¬ 
sion, and further that “ the case as certified from the Com¬ 
mission, together with any additional testimony taken by 
the courts shall be the record upon which it shall be heard,” 


lO 


thus, for the third time claiming the right to exercise 
judicial power. This absurd bill also proposed to confer 
upon the Commission absolute power to decide cases in¬ 
volving long and short haul rates, and to prescribe the 
rates and the conditions under which transportation shall 
be conducted throughout the United States. It also pro¬ 
vided that the Commission should be authorized to issue 
administrative orders andfinal adyninistrative orders. If 
enacted into law, it would have subjected the commercial, 
industrial and transportation interests of this country to 
the absolute control of a bureau through the exercise of a 
dispensing power. The bill failed to secure serious atten¬ 
tion in either branch of Congress, and apparently produced 
no other effect upon the legislative mind than of aston¬ 
ishment. 

The Commission, however, refused to abandon its puroose 
to acquire dispensing power. Again in the 56th Congress, 
March 2, 1899, to March, 1901, it approached Congress, but 
this time with a bill intended to evade the rule of govern¬ 
mental policy announced by the Supreme Court in the 
Maximum Rate Case, and thus to circumvent the judiciary. 
This bill was introduced December 12, 1899, Senate 
Bill 1439, 56th Congress, ist Session. It provided that the 
companies shall first make their rate sheets, which, having 
been made, the Commission shall, upon complaint made 
either by itself or any other competent complainarit, have 
power to revise and change the rates which have been made, 
thus conferring upon the Commission the right to recast 
every sheet in the country. The fallacy and artifice in¬ 
volved in this provision consisted in the pretense that it 


II 


avoided the objection of the courts that rates made in ad¬ 
vance of being charged and collected, even if authorized 
by statute, are not reviewable in the courts, as to their 
reasonableness, from the fact that they are legislative rates. 
An ingenious argument in favor of just such an arrange¬ 
ment had been made in the Maximum Rate Case, but was 
utterly discarded by the Supreme Court in the following 
terms: The vice of this argument is that it is building 
up indirectly and by implication a power which in terms 
is not granted.” The Commission ignored that declaration. 
Rates thus made would be legislative rates, and therefore 
not reviewable by the courts as to their reasonableness. 

The reasoning of the Commission in this matter was too 
inconsequential for serious consideration. Congress also 
did not fail to see that the real rate maker, in tke first 
instance^ is he who finally determines the rates before they 
have been actually charged and collected. The bill just 
mentioned also proposed to confer upon the Commission the 
power “ to prepare and publish the rules, regulations and 
conditions for freight transportation,” a proposition which 
clearly involved the creation of a dispensing power. 
See Section 3 of the Bill. 

Like its predecessors this bill gained no favor with the 
national legislators. Congress was not prepared to subor¬ 
dinate the Federal judiciary to the Interstate Commerce 
Commission. Nor was it prepared to institute in this 
country a bureaucratic imperialism endowed with “that 
great anomaly known as the dispensing power,” which in 
all ages has been an attribute of tyranny and oppression. 
Such the proposed expedient was clearly perceived to be at 


12 


the beginning by Judge Cooley and his associates, who 
repudiated it absolutely. 

During this Congress (56th) the Interstate Commerce 
Commission engaged in a reprehensible scheme. It allied 
itself to a propaganda fully committed to the object of in¬ 
ducing Congress to grant to it autocratic powers over the 
internal commerce of this country. That propaganda is 
still in existence and militant. * At the same time the 
Commission had recourse to an astounding expedient. On 
December 8th, 1899, by formal vote it instructed its secre¬ 
tary to propagate among the trade organizations of the 
country its ideas as to Commission rate making “ by dis¬ 
tributing among them such reports, papers and documents 
as are designed to accomplish that purpose, and to devote 
himself assiduously to such duty.” In pursuance of this 
order the Secretary of the Commission issued to the com¬ 
mercial bodies of the country a circular letter dated Feb¬ 
ruary 3, 1900, requesting them to urge upon Senators and 
Members of Congress the importance of passing Senate 
Bill 1439. The glaring impropriety of this movement was 
evident to the national legislators and was instrumental in 
preventing any legislative action whatever upon the Com¬ 
mission’s anti-American and impracticable bill. 

During the 57th Congress—March 4, 1901, to March 4, 
1903—the Commission stultified itself glaringly before 
Congress. Until March, 1902—fifteen years after its organ¬ 
ization—the Commission had neglected to employ the civil 
remedy provided in Section 16 of the Interstate Commerce 

* At the present time it is endeavoring to mislead the com¬ 
mercial bodies of the country into the folly of endorsing its appeal to 
Congress to confer upon the Commission autocratic power. 



13 


Act. Early in that month, however, the Commission had 
recourse to that provision of the law for the prevention of 
rate-cutting—a misdemeanor under the Act to Regulate 
Commerce. On March 24th, at the instance of the Com¬ 
mission, Judge Grosscup, of the Northern District of Illi¬ 
nois, issued an order granting a temporary injunction in an 
important case pending at Chicago, and in so doing 
expressed the opinion that “ the expedient might turn out 
to be the vitalizing of the Act.” That expectation was 
realized. The injunction proved effectual in greatly abat¬ 
ing, if not in entirely arresting, the evil complained of. 
But the successful application of this provision of the Act 
to Regulate Commerce ran counter to the scheme of auto¬ 
cratic rule which for years the Commission had had in 
mind. Within one month after Judge Grosscup’s order 
was issued, the Commission stultified itself by appearing 
before the Committees on Interstate Commerce of the Sen¬ 
ate and House of Representatives in earnest advocacy of a 
bill providing for the repeal of so much of Section 16 of 
the Act to Regulate Commerce as embraces the effectual 
civil remedy just mentioned, and proposed to substitute in 
lieu thereof an amendment providing for obedience to 
the autocratic authority of the Commission. (S. 3575 and 
H. R. 8337, 57th Congress, ist Session, the same being 
identical.) This attempt to emasculate the Interstate 
Commerce Act was exposed and failed utterly. 

Thus did the Commission express to Congress and to 
the country its determined purpose, through a desperate 
expedient, to expunge from the Interstate Commerce law 
the power of the judiciary to participate in commercial 


14 


regulation and to acquire for itself an autocratic dispensing 
power over the commercial and transportation interests 
of this country. 

In this attempt the Commission went so far as to deny 
the truth of the published record of its own experiences. 
Four members of the Commission appeared before the 
Committee on Interstate and Foreign Commerce of the 
House of Representatives and declared that Congress ought 
to grant to it the power of rate making in order to prevent 
unreasonable rates and unjustly discriminating rates, at the 
same time asserting that rates were advancing. These state¬ 
ments were proved to be absolutely incorrect. It was shown 
that during the fifteen years of the existence of the Com¬ 
mission not a single case of exorbitant rates had been 
proved in the courts, that on the average only one case of 
unjust discrimination had been proved in each two and a 
half years of the life of the Commission and that rail rates 
had been constantly falling for thirty-five years. In this 
connection the following historic facts were adduced: 

{a) The average rates charged on the railroads of the 
United States fell from 1.99 cents per ton per mile in 1870 
to 0.70 cents per ton per mile in 1890. This reduction 
upon the basis of tons carried in 1890 would have amounted 
to a saving to the people of the United States of nearly 
two thousand million dollars a year. 

{b) Data furnished by the Bureau of Statistics of the 
Treasury Department, clearly prove that from 1894 to 
1901—the latest year of official data—the railroad freight 
traffic of the country increased 81 per cent, railroad receipts 
increased 61 per cent, railroad operating expenses increased 


15 

41 per cent, while the average rate charged decreased 
per cent. 

(c) Forced to concede this record of reduced rates in 
years past, the Commission sought to show that there is a 
present tendency toward an undue advancement in rates. 
But in this, also, it signally failed. The official record of 
the Interstate Commerce Commission shows that from 
1899 to 1901 the railroad freight traffic of the country in¬ 
creased 17 per cent, railroad receipts from freight traffic 
increased 22 per cent, operating expenses increased 20 per 
cent, while rail rates increased only 4 per cent. This ad¬ 
vance in rates was much less than the advance in material 
required for railroad operation and much less also than the 
advance in wages of labor employed on railroads during a 
period of unprecedented prosperity marked generally by 
advancing wages and prices. The President of the Phila¬ 
delphia & Reading Railroad has recently declared that the 
increase of wages on that road amounted to 1,200,000 
during the preceding year. In various parts of the country 
recent advances in wages of railroad employes range 
from 12 to 16 per cent. It is estimated by “The Railway 
News’^that $100,000,000 represents the increase in pay 
rolls of the railroads of the country for the year 1892. It 
seems reasonable to admit that the railroads which feel the 
advance of prices and wages so keenly on the expense side 
should share at least to a limited extent on the side of 
receipts. 

(d) Mr. Knapp, Chairman of the Commission, 
sought to convince the House Committee on Commerce 
that the apparent decrease in rail rates since the year 1890 


i6 

was caused by the inordinate increase in the tonnage of low- 
priced freights such as coal and ores, but official data of 
the Government were adduced showing that the reverse 
was true, the tonnage of coal and ores having increased 
only 74 per cent while that of other freights increased 
about 86 per cent. 

{e) The Commission then had recourse to a misleading 
and fallacious statement. In order to inculcate the grossly er¬ 
roneous idea that the railroads of the country are habitually 
violating the provisions of the Act to Regulate Commerce, 
certain of its members declared that during the thiee pre¬ 
ceding years, 807 complaints of all sorts, or 269 a year, 
had been made to the Commission. This num¬ 
ber of complaints, however, was utterly insig¬ 
nificant in comparison with the total number of 
freight transactions, amounting to many millions a year. 
Besides, it was shown from the records of the Commission 
that 784, or 97 per cent, of the 807 complaints were dis¬ 
posed of by the Commission informally and without a 
hearing, the complaints having been withdrawn, or the 
matters complained of having been corrected by the 
companies without subjecting the Commission to the 
trouble of a trial and the issuance of formal orders. Of 
the 23 cases heard and decided, or only 3 per cent of the 
complaints instituted, not a single case of unreasonable 
rates or of unjustly discriminating rates has been proved 
in the courts. This clearly demonstrated the correctness 
of Judge Cooley^s declaration that the “Act to Regulate 
Commerce” tends to both reasonableness and equality of 
rate.” Thus instead of proving to the House Committee 


that the present law is inadequate, Mr. Knapp’s statement 
was the means of bringing to the attention of that Com¬ 
mittee the undeniable truth that the railroad companies 
are, in a remarkable degree, conforming to the require¬ 
ments of the Act to Regulate Commerce, and that the ad¬ 
ministration of the law, even in the hands of a commission 
bitterly opposed to its vital provisions, has proved to be 
not only adequate, but highly successful and beneficial. 

Furthermore, autocratic rate making, as advocated by 
the Commission, has been shown to be inapplicable to 
the cure of the evil of rate cutting; and therefore misdi¬ 
rected. 

With all its statements fatally wounded as to facts the 
Commission utterly failed to impress the 57th Congress 
with the correctness of its assertions or the soundness of 
its arguments. The bill which it advocated did not reach 
the first stage of legislation in the House of Representa¬ 
tives or in the Senate, and the status of the Commission 
before Congress was impaired. 

At various times the Commission has recommended that 
it be endowed with the power to order an increase of rates 
in order to maintain what it may regard as the proper re¬ 
lation of competition rates. No argument is needed in 
order to prove that such an exercise of the rate-making 
power would be exceedingly obnoxious to the people of 
this country. 

In another particular the Commission has repeatedly 
attempted to usurp authority and to override the law. The 
Act to Regulate Commerce declares that its provisions 
shall apply only to connected lines of railway ‘‘ under a 


iS 


coinnioii control, inanagement or arrangement for a con¬ 
tinuous carriage or shipment.” But in defiance of this 
plain limitation of law, in the Maximum Rate Case, and 
in other cases, the Commission has attempted to adjust the 
rates on one line with reference to the rates on other lines 
in other parts of the country. This shallow attempt to 
exercise a dispensing power has been sternly repelled 
by the courts. An order of the Interstate Commerce 
Commission in regard to rates from Chicago and St. 
Louis to Wilmington, North Carolina, as compared 
with rates to other points in other States, has recently 
been reversed by Judge Thomas R. Purnell in the U. S. 
District Court at Raleigh, N. C. Any attempt to set in 
motion this attempted assertion of power would inevitably 
clash with the constitutional provision that “No prefer¬ 
ence shall be given by any regulation of commerce to the 
ports of one State over those of another.” 

Since January i, 1892, when Judge Cooley retired from 
office, the Commission has neglected to avail itself of the 
powers of regulation conferred upon it by the Act to Regu¬ 
late Commerce, and as hereinafter shown has sought to 
gain autocratic power. It has denied that it is in any 
special manner responsible for the prevention of rate 
cutting; it has opposed an amendment designed to 
strengthen the penal provisions of the act, and it has been 
derelict in the discharge of its duties with respect to rate 
cutting. All this was fully set forth in an argument which 
I had the honor to make before the Senate Committee on 
Interstate Commerce on June 6, 1902. In a word, during 
the last twelve years the Commission has persistently op- 


^9 


posed the method of regulation prescribed in the Act to 
Regulate Commerce, and has as persistently advocated the 
adoption of an autocratic method of regulation through 
the exercise of a dispensing power. 

Thus far the Commission has signally failed before the 
courts and before Congress to secure the power to prescribe 
rates, to exercise a general dispensing power over the 
conduct of railroad transportation, to secure a part of the 
judicial function and to circumvent the judiciary. It has 
also completely failed to prove that the experiences of the 
country with respect to railroad rates justify its preten¬ 
sions. On the other hand, its own record proves beyond 
question that the regulation of the railroads provided in 
the Act to Regulate Commerce has been highly beneficent 
and successful. The Commission seems to have been 
misled by the mere frictional resistances and incidental 
evils of the grandest and most beneficent system of trans¬ 
portation that the world ever saw. 

THE FUTURE POLICY OF THE INTERSTATE 
COMMERCE COMMISSION. 

Notwithstanding its repeated failures to acquire auto¬ 
cratic power, the Interstate Commerce Commission is ap¬ 
parently as determined as ever to prosecute its claim before 
the 58th Congress when it shall convene in December next. 
This purpose was clearly indicated by Hon. Charles A. 
Prouty, Interstate Commerce Commissioner, in an address 
delivered before The American Economic Association at its 
last annual meeting. On that occasion Mr. Prouty declared 
in favor of a scheme, the effect of which would be to create 
a fourth branch of the National Government—“A Dispens- 


20 


ing Power in the United States.’^ This power, as he clearly 
indicated, would be as independent of the legislative, exe¬ 
cutive and judicial departments of the Government as 
those departments are of each other. His argument is 
based upon the following attempted syllogism— There is no 
reguIatio 7 t of railroads in the United States^ since regula¬ 
tion implies control; there is no control of railroads — 
hence there is no regulation!. 

The infirmity of Mr. Prouty’s syllogism lies in his prem¬ 
ises. The American Railroad System is thoroughly regu¬ 
lated and controlled by an all-pervading and effective 
system of self-government, which is amply supplemented by 
strenuous and effective State and National governmental 
regulation. There is no business in this country which is 
more completely the subject of legal restraint than is that 
of railroad transportation. “ The railroads are regulated 
by States, by cities, counties, towns, village boards of trus¬ 
tees, school districts, and by almost every other political sub¬ 
division of the State.” The law of the common carrier 
and of the public highway and the decisions of the courts 
embrace volumes of regulation applicable to the conduct 
of railroad transportation, while the Act to Regulate Com¬ 
merce amplifies, extends and particularizes the regulative 
principles of the common law in its application to the rail¬ 
roads. It has been asserted by an eminent lawyer that 
“ the railroad is held to a more rigid responsibility in the 
courts than any other litigant.” The judicial records of 
the country afford abundant proof of the correctness of this 
assertion. Besides, the published reports of the Government 
afford abundant evidence of the fact that the American 




21 


Railroad System is a most admirably regulated system of 
transportation. In the light of these facts the assertion 
of Mr. Prouty that there is no regulation or control of the 
railroads in this country is manifestly absurd. Mr. Prouty 
exposed his deep-seated aversion to any interference in the 
work of railroad regulation by the judicial authority—at 
once the protection of civil rights, the defense of public 
order and the palladium of liberty. He declared with re¬ 
spect to governmental regulation generally that “ it cannot 
be done through the courts,” and expressed the belief that 

any system of regulation—which give the Federal courts 
power to suspend and finally set aside the orders of a com¬ 
mission must be of doubtful value.” So he proposed to 
eliminate the Federal judiciary from any participation what¬ 
ever in the work of regulation. 

Furthermore, Mr. Prouty would eliminate the legislative 
and present executive powers of government from any 
actual participation in the work of railroad regulation and 
assign the function exclusively to his proposed Dispensing 
Power in the United States. This he states as follows : 

“ It is earnestly insisted that the freight rate is a com¬ 
mercial proposition which must be left to the laws of com¬ 
merce, with which the Government cannot safely meddle.” 

In this he seems to have distinctly in mind a scheme 
which, in effect, would supersede the present powers of 
government. He recommends, therefore, that “ the laws 
of commerce ” shall be administered by means of a duplex 
autocratic dispensing power completely outside of our 
present system of government. 

Mr. Prouty then proceeds to explain the organic features 
of his plan as follows : It is to embrace first—the Com- 


22 


mission endowed with the autocratic power of prescribing 
all the interstate rates in the country. Referring to the 
“ suggestion, to permit the Federal courts to review and 
set aside, if found unreasonable, the orders of the Com¬ 
mission ” he says, “it is very doubtful whether any such 
system can ever give satisfactory results,” and adds, “these 
questions are not of a judicial nature and cannot be intel¬ 
ligently passed upon by courts.” In this connection he 
says: 

“ A court administers the law as it is laid down in statute 
or in precedent, the jury decides the fact upon the testi¬ 
mony of witnesses. Not so the Commission. Here is no 
precedent to be administered. No dispute generally arises 
as to the facts. The question is, what under these ad¬ 
mitted conditions shall be done? and this question is largely 
one of judgment.” 

And again : 

“Such a commission is an expert body, * * * its con¬ 
clusion must still rest in the good judgment of its mem¬ 
bers. Its decision is the act of an expert body.” 

He labors to prove that the work of the Commission 
should be purely that of a body endowed with dispensing 
power and not subject to the restraint of statute or pre¬ 
cedent or court. In all this he clearly begs the whole 
question. 

Having excluded any sort of judicial interference with 
the work of the Commission, Mr. Prouty proceeds to ex¬ 
plain the second part of his dual scheme of regulation. 
Conceding that the conclusions of the Commission ought 
to be subjected to some sort of review, he proposes a tri¬ 
bunal “in the nature of a commerce court” a tribunal 


23 


fully endowed with judicial attributes:—namely, the 
power “to make decrees and execute process,” to “hold 
office for life and to possess all the independence of judges.” 
Besides, its decisions are to be final. Mr. Prouty earnestly 
protests that his proposed commerce court shall not be in 
any manner subject to or related to the Federal judiciary, 
for he maintains that the matters to be reviewed by the 
proposed court are “ not properly law questions,” but “the 
judgment of a quasi legislative body,” and, therefore, that 
“ the review of such a judgment is not a judicial func¬ 
tion” and its proceedings “are not lawsuits,” the question 
to be decided in each case being “ largely one of judg¬ 
ment.” 

Thus he proposes to create an administrative board, bear¬ 
ing the name of a court, and fully endowed with judicial 
attributes in the face of the constitutional provision that 
“ the judicial power of the United States shall be vested in 
one Supreme Court, and in such inferior courts as the 
Congress may from time to time ordain and establish.” It 
goes without saying, that Mr. Prouty’s proposed “ Com¬ 
merce Court” would be simply an administrative bureau 
endowed with an autocratic dispensing power, and there¬ 
fore similar in character to his proposed commission. 

It is difficult to imagine a more glaring political solecism 
than the proposed commerce court endowed with judicial 
attributes, but without a judicial function or a legal duty 
to perform. Besides, as hereinafter indicated, the whole 
scheme is in a political sense revolutionary. 

Referring particularly to the questions which will come 
before this non-judicial court, Mr. Prouty says : “ These 


24 


questions are not of a judicial nature and cannot be intelli¬ 
gently passed upon by courts”—meaning the Federal courts. 

He adds: 

“ Federal judges are not selected for that purpose. Most 
of them have absolutely no experience in such matters. 
Their time is fully occupied with their proper duties, and 
the very nature of those duties in a measure unfits them to 
appreciate these questions.” 

The absurdity of this assumption is apparent. Commer¬ 
cial law—especially the law of the common carrier—has 
for many centuries engaged the studious thought of the 
judicial mind. And yet it is gravely proposed by Mr. Prouty 
that all this knowledge which by a process of evolution has 
been incorporated into the very fibre of our civilization 
shall be set aside in favor of the emanations of the inner 
consciousness of a set of commissioners and of judges with¬ 
out judicial function, guided solely by their own introspec¬ 
tions as to the fitness of things. The peculiar misfortune 
of Mr. Prouty’s reasoning, in this regard, consists in the 
historic fact that so many of the decisions of the Commission 
have been overruled by the courts for manifest error in re¬ 
gard to commercial and economic considerations, which 
mark the particular function of the Commission. 

In defense of his theory Mr. Prouty says: 

“ As well might it be provided that (the Federal) courts 
shall enforce the laws enacted by Congress, if such laws are 
in their judgment reasonable and just,” as “ to permit the 
Federal courts to review and set aside, if found unreason¬ 
able, the orders of the Commission.” 

In this he clearly suggests that the orders of the Com¬ 
mission should have the same authority and dignity as the 
laws of Congress. The Supreme Court has declared that 


25 


public policy in certain cases is what the law directs, but 
presumably, it will be a long time before the people of this 
country will consent that public policy shall be what the 
Interstate Commerce Commission directs. 

In a word, the dual organization which Mr. Prouty 
recommends consists of an autocratic administrative board 
supplemented by an autocratic reviewing board forming a 
duplex bureaucratic attachment to our present form of 
government and constituting a full blown dlspensing 
POWER IN THE UNITED STATES. All that Congress and 
the Chief Executive would have to do with this new 
branch of the National Government would be to create 
it and grant it plenary power. 

According to Mr. Prouty’s own description of his 
scheme it would scorn both the substantive and adjective 
provisions of the science of law and of government and 
convert this country into a vast commercial and industrial 
autocracy. Such a scheme would have as its most strik¬ 
ing historic parallel the form of government proposed by 
Jack Cade—“My mouth shall be the Parliament of Pmg- 
land.” 

The substantial agreement between the views expressed 
by Commissioner Prouty and the official utterances of the 
Interstate Commerce Commission as hereinbefore noted, 
raises the presumption that the Commission fully approves 
the views expressed by him. 

As the proposition to create a dispensing power on the 
lines suggested by Mr. Prouty and according to ideas 
urged by the Commission during the last ten years will 
probably command the attention of the Chief Executive 


26 


and of Congress at its next session, it seems proper to con¬ 
sider the subject somewhat carefully upon its merits. 

WHAT IS INVOLVED IN THE PROPOSITION TO 
CREATE A DISPENSING POWER IN THE 
UNITED STATES. 

The nature and effects of a dispensing power, such as 
that proposed by the Interstate Commerce Commission, is 
not conjectural. It is historical. In all ages such power 
has been the antithesis of judicial authority and a concom¬ 
itant of tyranny and oppression. The exercise of the dis¬ 
pensing power through a bureaucratic despotism, in tne 
age of Justinian, was an effective cause of the downfall of 
the Roman Empire. The political struggle in England 
over what Macaulay styles “that great anomaly known as 
the dispensing power” began with Magna Charta in 1215 
and continued four hundred and seventy-three years. Dur¬ 
ing that period the people of England were divided upon 
the vital question which it involved. The idea of a dispens¬ 
ing power of government was finally blotted out for the 
English-speaking people by the “Declaration of Right” 
which terminated the British Revolution of 1688. In 
that document it was declared “that the dispensing power 
lately assumed and exercised had no legal existence.” 
(Macaulay’s History of England, Vol. 2, p. 525.) This 
declaration constitutes a fundamental feature of the British 
constitution and is deeply engraven in the hearts and con¬ 
sciences of the people of England. 

The beheading of Charles I was an incident of the po¬ 
litical struggle just mentioned. Lord Coke, taking the 
extreme monarchical view declared that “absolute despotic 


2/ 


power in all governments must reside somewhere.” A 
hundred years later, however, Montesquieu clearly proved 
that such power is utterly incompatible with personal 
liberty. 

De Toqueville, in speaking of the administrative despot¬ 
ism involved in bureaucratic government says : “ Such a 
power compresses, enervates, extinguishes and stupefies a 
people ” (American Democracy, Vol. 2, p. 333). A recent 
writer of ability in describing the evils of bureaucratic rule 
in the nations of continental Europe declares that “ Re¬ 
publicanism and bureaucracy are incompatible existences.” 
(Greg, Miss., Essays, 2d Series, p. 55.) 

The idea of creating any sort of a governmental dispens¬ 
ing power in the United States was spurned by the men 
who formed the Constitution of 1787. In speaking of the 
disposition of the people of this country at the time of the 
^ framing of the National Constitution, Hon. Joseph H. 
Choate, our Ambassador to Great Britain has recently said : 

But all agreed in a supreme dread of arbitrary power, 
whether it should be exercised by the executive, the legis¬ 
lative or the judiciary.” 

The framers of the Constitution were greatly influenced 
in their opposition to any sort of despotic exercise of govern¬ 
mental power by the utterances of Montesquieu in “ Esprit 
des Lois” which Mr. Justice Holmes has characterized as 
“ an epoch-making book.” Therein the vital importance 
of an independent judiciary was clearly explained. This 
view was highly commended by Hamilton and also by 
Judge Story. By way of illustration, Montesquieu 
pointed to the fact that certain monarchical countries of 


28 


Europe which respected the independent judicial authority 
were conservators of personal liberty, whereas the 
republics of Italy which governed through a body of magis¬ 
trates unrestrained by an independent judicial power were 
cruel despotisms. This is the particular type of dispensing 
power which Mr. Prouty proposes to have established in 
this country. 

Our own political history is full of instruction upon this 
subject. Under the Confederacy which existed prior to 
the year 1789 the power exercised by the States over the 
the internal commerce of the country embraced not only 
the power to regulate, but even the power to interdict inter¬ 
state trade. This led to commercial disorder and was fast 
tending to disunion. Hence there arose a coercive public 
sentiment in favor of depriving the States of that power. 
This sentiment, in turn, created a demand that the internal 
commerce of the country should be absolutely free, and that 
its foreign commerce should be impartially administered. 
Hence strenuous objection arose in the Constitutional Con¬ 
vention of 1787 to granting to the Congress of the United 
States any power whatever for the regulation of the internal 
commerce of the country. In the course of debate this ob¬ 
jection was modified by a proposition to grant such power 
by a two-third vote of both branches of Congress. But at 
last the limitation to the power of Congress to regulate 
commerce as expressed in the fifth clause of Section 9 of 
Article i of the Constitution was agreed to. That limita¬ 
tion reads as follows : “No preference shall be given by 
any regulation of commerce or revenue to the ports of one 
State over those of another.” It then became possible for 


29 


the convention to agree that Congress shall have power to 
pass laws regulative of commerce by a majority vote. And 
thus it stands in the Constitution. (Madison’s Journal of 
the Constitutional Convention). 

Besides there was at that time a prevalent and control¬ 
ling political sentiment in opposition to any atte mpt to de¬ 
volve upon a National Government any sort of responsibility 
for the commercial prosperity of the country or for deter¬ 
mining the course of its development. In the competitive 
struggles of life men submit to the results of their own 
interaction as to the inevitable, even unto death, but when 
the Government becomes openly and unmistakably the arbi¬ 
ter of their destinies and the author of their misfortunes, 
then murmurs of discontent will be heard, and unless the 
cause of discontent is removed will inevitably culminate in 
public disorder. This was clear to the men who founded 
our governmental institutions. 

The founders of the Republic also clearly saw that the 
attempt to control and direct the course of the development 
of the commerce of the country would fatally overload the 
National Government with jurisdiction. Besides, their oppo¬ 
sition to any form of autocratic authority over the business 
affairs of the people was supplemented by an abiding faith 
in the conservatism which inheres in the untrammelled 
interaction of forces. That faith, in connection with the 
constitutional provision and limitations just mentioned de¬ 
fines the policy of commercial liberty which has escorted 
this nation from the beginning and ever since has consti¬ 
tuted a muniment of our national character. Mr. Jefferson 
was the most conspicuous apostle of that faith and policy. 


30 

In his first message to Congress as President, transmitted 
December 8, i8oi, he said : 

“Agriculture, manufactures, commerce and navigation, 
the four pillars of our prosperity, are the most thriving 
when left most free to individual enterprise.” 

If Mr. Jefferson could return to the scenes of this world 
he would undoubtedly add to the above enumeration rail¬ 
road TRANSPORTATION as being by far the most con¬ 
spicuous exemplification of his noble faith in the con¬ 
servatism which inheres in the untrammelled interaction of 
commercial and industrial forces. 

From the foregoing, it clearly appears that the founders 
of our Government were radically opposed to anything in 
the nature of a dispensing power or arbitrary power of any 
sort over the commerce of the country, and that the policy 
of free internal commerce which they established on this 
continent and which has ever since been firmly maintained 
repels any such scheme as that proposed by Mr. Prouty and 
his associates. Undoubtedly the people of this country, if 
again brought to the test, would as decidedly pronounce 
against any form of despotic rule as they did in 1787. 

As before stated, recourse to anything in the nature of 
a dispensing power was distinctly repudiated by Judge 
Cooley and his able colleagues who constituted the first In¬ 
terstate Commerce Commission. In the spirit of the 
founders they declared it to be “ not consistent with sound 
principles of government,” and that such power has not 
been given to the Commission. Manifestly it conflicts with 
elementary principles of our civilization. 

But in the face of the world’s experiences and especially 


31 

of our own history the Interstate Commerce Commission 
proposes to establish in this country a dispensing power 
under bureaucratic rule, its most objectionable form. 

Certain general observations suggest themselves in this 
connection : 

(a) Opposition to adherence to the fixed policy of the 
country, frequently finds expression in the declaration that 
new conditions demand new governmental expedients. 
This is freely admitted. That constitutions and laws and 
public policies should respond to the evolution of society 
may be regarded as an axiom of our aggressive civilization. 
But the admission does not justify the adoption of anti¬ 
quated bureaucratic methods, involving a dispensing power, 
which belongs to the dead past, which more than two- 
hundred years ago became archaic under constitutional 
government in Great Britain, which for more than a thous¬ 
and years has been the political antithesis of the judicial 
function, and which in every age has been a concomitant 
of tyranny and oppression. 

The use of the word dispensings as here employed in its 
political sense, like the words forestallings regretting and 
engrossings has so fallen into disuse that its original sig¬ 
nificance in that sense is almost forgotten. The revival of 
the expedient as an expression of the spirit of populism 
and of state-socialism justifies the revival of the designa¬ 
tion. 

(b) The idea is advanced by advocates of Commission 
rate making, that in addition to the power to condemn a 
particular rate on the ground of unreasonableness (which 
power the Commission now possesses) it should also be 


32 


authorized to declare what that rate shall be^ or its maxi¬ 
mum limit, in the future. Whether the Commission does 
or does not now possess that power or may or may not 
constitutionally be endowed with that power, subject to 
judicial approval, need not here be discussed. But the 
advocates of Commission rate making go further and as¬ 
sume that such judicial sanction of a particular rate 
ordered by the Commission would carry with it the de¬ 
termination of all other like charges—in a word that it 
would, or that by some statutory provision or legal pro¬ 
cess, not yet fully explained, it might be made to pro¬ 
ject that rate to the entire schedule of which it is a part. 
The assumption is clearly hypothetical. A fatal objection 
to such exercise of the judicial power arises. A particu¬ 
lar rate prescribed by a railroad company in a schedule 
applies to commodities and localities under a great variety 
of circumstances and conditions. Such application is dis¬ 
cretionary with the company. It is in the nature of a 
levelling process, not only justified, but enforced by com¬ 
mercial and economic conditions, and is highly promotive 
of the material interests of the country. But considera¬ 
tions of this sort cannot possibly control judicial procedure, 
for that would involve the exercise of the legislative func¬ 
tion by the courts, which is inadmissible under our form 
of government. Any unjust discrimination which might 
arise from the discretion exercised by the railroad com¬ 
panies can be corrected readily under provisions of the Act 
to Regulate Commerce which are strictly in accord with 
the rules of the common law. 


33 

THE MAGNITUDE OF THE WORK WHICH WOUED 
BE INVOLVED IN THE EXERCISE OF THE 
PROPOSED DISPENSING POWER IN THE 
UNITED STATES. 

The magnitude of the work which would devolve upon 
the proposed dispensing power in the United States is a 
consideration of the highest importance. It would be 
enormous. In its seventh annual report (1893) Com¬ 
mission declared at pages 10 and ii, that it ought to be in¬ 
vested not only with the power to determine rates, but also 
with the power to determine the relative commercial status 
of the various towns, cities, sections and industries of this 
vast country. This was expressed as follows: 

“ To give each community the rightful benefit of location, 
to keep different commodities on an equal footing, so that 
each shall circulate freely and in natural volume, and to 
prescribe schedule rates which shall be reasonably just to 
both shipper and carrier is a task of vast magnitude and 
importance.” 

This evidently would be an enormous power. 

In its eleventh annual report (1897) the Commision de¬ 
clared that it ought to possess the power “to determine” 
rates, fares, charges and classifications, privileges, facilities 
or regulations,” and to “order schedules in accordance with 
the decision of the Commission.” 

In the same report (1897) at page 26, the Commission 
said in regard to the magnitude of the proposed work: 

“ The amount of money involved would be much greater 
than that involved in the decision of any trial court in the 
United States. The results would usually be of more con¬ 
sequence to the litigants than those of any such court.” 


34 

There can be no doubt as to the correctness of this state¬ 
ment. The value of the property thus exposed to auto¬ 
cratic appraisement and determination in one year, might 
exceed the total value of all the property rights adjudi¬ 
cated by the Federal courts since the adoption of the Con¬ 
stitution. 

In the Maximum Rate Case the Supreme Court of the 
United States characterized the single proposition of Com¬ 
mission rate making as “a power so vast and comprehen¬ 
sive, so largely affecting the rights of carrier and shipper, 
as well as indirectly all commercial transactions.’’ The 
court also spoke of it as “ the difficult problem of just and 
reasonable rates for all the various roads of the country.” 

In his recent address before the American Economic 
Association, Mr. Prouty stated that the organization in¬ 
vested with the dispensing power “ would necessarily ren¬ 
der very many decisions.” This is undoubtedly true. He 
alsojproposed that it shall “ deal with monopoly in other 
branches of interstate commerce,” which signifies that it 
should have control of the general anti-monopoly movement 
which now engages the attention of the country. 

Mr. Prouty also clearly indicated that the exercise of 
the proposed power would exclude the legislative, ex¬ 
ecutive and judicial branches of the Government of the 
United States from any actual participation in the work of 
regulation, and that it would admit no limitation upon the 
exercise of its authority except the personal judgment of 
the men ^composing the two proposed “ expert bodies ” as 
to “ conditions,” unfettered by court or law or precedent. 
In a word, his proposed method of regulation would con- 


35 

stitute an exclusive and inclusive autocratic dispensing^ 
power. 

A dispensing power in the United States which should 
embrace the functions and the scope of authority already 
indicated would manifestly carry with it the enormous task 
of supervising and directing the entire internal commerce, 
the transportation interests and indirectly the industrial in¬ 
terests of the country. 

The magnitude of the work of regulation thus involved 
would not be entirely discretionary with the exercise of 
the proposed dispensing power, but to a degree would be 
mandatory upon it; for the existence of the power would 
carry with it an inevitable duty. The correctness of this 
assumption is clearly indicated by the experience of the 
Interstate Commerce Commission during the first two 
months of its existence. The Commission was then for a 
brief period led to admit tacitly that it was invested with 
the power to determine, in advance, under what circum¬ 
stances and conditions the right to charge more for the 
shorter than for the longer haul could be admitted. The 
demands upon the Commission for the determination of 
such questions proceeded almost entirely from railroad 
companies. It was assumed by certain attorneys that ne¬ 
glect to secure in advance the permission of the Commis¬ 
sion to make such changes would subject the companies to 
heavy penalties. These demands upon the time and 
attention of the Commission became exceedingly onerous. 
In denying the authority of the Commission to exercise 
such power. Chairman Cooley, speaking for the Commis¬ 
sion, declared on June 15, 1887, that the assumed duty 


36 

was “ superhuman,” adding that “ a construction of the 
statute which should require its performance would render 
the due administration of the law altogether impracticable 
a conclusion which led that eminent lawyer and jurist, and 
his able coadjutors, to declare that “such a construction of 
the statute could not have been intended by the law-maker.” 
Therefore all thought of exercising any sort of dispensing 
power was utterly repudiated. 

Beyond all question, the sort of governmental regulation 
now urged for this country by Mr. Prouty and the Inter¬ 
state Commerce Commission would exert over its commer¬ 
cial, industrial and transportation interests an authority 
vastly greater than that ever exercised by Congress, by the 
President of the United States, by the Federal judiciary, 
or by all combined. It would, besides, reverse the commer¬ 
cial policy of non-interference with the interaction of com¬ 
mercial and industrial forces which was established at the 
beginning, which was strenuously upheld by Thomas Jeff¬ 
erson and his compatriots and which has safeguarded the 
material interests of this country ever since. 

As remarked in the beginning and as indicated by his¬ 
toric facts, the political evils which would result from the 
establishment of a dispensing power in this country would 
vastly outweigh all economic and commercial causes of 
complaint which now exist or which could be expected to 
arise as the result of a policy so impracticable and revolu¬ 
tionary. 

It is believed that if the office of the Commission in 
Washington were so enlarged as to enable it to perform all 
the functions which would devolve upon it under the pro- 


37 


posed dispensing power, it would be equal in magnitude 
to all the other offices of the present administrative gov¬ 
ernment of the United States. 

THE RIGHTS OF PROPERTY VIOLATED. 

In order to defend his scheme against the charge of vio¬ 
lating established principles of civilization in regard to the 
rights of property, Mr. Prouty was impelled to make the 
following admission: 

“ The railway rate is private property. Any unjust re¬ 
duction of that rate is an unjust taking of private pro¬ 
perty.” 

And again : 

“ Such a commission should not make interstate railway 
rates. So long as railways are private property they 
should have the right to name their rates in the first in¬ 
stance^ to determine what competitive conditions they will 
meet, what industries they will foster, what will be, in 
general, the policy of the road.” 

But immediately he proceeded to deny all this by declar¬ 
ing that the Commission and the proposed non-judicial 
court should be invested with plenary power to change 
all rates at will before they have been charged and collected^ 
thus making the Commission the actual rate maker and 
the dictator of the policy of the road the first instance^ 
through the exercise of a dispensing power which has no 
place in our governmental system, which, as before shown, 
excludes the Federal judiciary and which has no semblance 
of “ due process of law,” thus violating a clearly expressed 
provision of the Constitution of the United States, and 
running counter to established principles of our civiliza- 


38 

tion regarding the rights of property. This monstrous 
proposition was emphatically negatived by the Supreme 
Court in the Maximum Rate Case, and has repeatedly been 
repelled by Congress. And yet this is precisely the power 
which the Commission, and the propaganda acting in its 
interest, now asks Congress to confer upon it. 

The glaring solecism involved in Mr. Prouty’s professed 
respect for the rights of property and his concurrent proposi¬ 
tion to violate the rights of property suggests the importance 
of noting the broad line of distinction between regulation 
by preliminary judgment, involving the exercise of a dis¬ 
pensing power and regulation by an administrative board 
subject to proper judicial review. 

REGULATION BY PRELIMINARY JUDGMENT. 

At the beginning, the Commission, speaking by Judge 
Cooley, declared that it is not endowed with the power to 
administer the law “ by preliminary judgment,” but now 
it asks Congress to grant to it the power to prescribe rates 
and to exercise certain administrative functions in regard 
to railroad transportation upon the ground of mere appre¬ 
hended evils, and for the prevention of what it regards as 
dangers threatened by changes in economic and commercial 
conditions assumed to justify such action, but which, as 
hereinbefore demonstrated, have exhibited no tendency 
towards such dire results. In a word, the Interstate Com¬ 
merce Commission proposes to apply a hypothetical remedy 
to the cure of prospective evils revealed by its own intro¬ 
spection, but not verified by any actual result of experience. 

While it is a beneficent and necessary function of the 


39 


judicial power to enjoin threatened violations of positive 
law, the judiciary can never acquire the right to adjudicate 
prospectively upon what it may regard as probable economic 
results of commercial or industrial interaction. That 
would be undisguised judicial legislation which is not per¬ 
missible under our form of government. Time and again 
the lessons of experience have proved that such action 
would be unwise and grossly repressive of the ever chang¬ 
ing demands of a progressive age. In a word the evolution 
of economic and political conditions has not proceeded far 
enough in this world for judicial decisions based upon ap¬ 
prehended commercial and economic evils. Such power 
could not be entrusted to the courts without imminent 
danger of trespassing upon the fundamental principles of 
personal liberty ; much less can an administrative board be 
allowed to project the adjustment of personal rights by pre¬ 
liminary judgment involving the exercise of a dispensing 
power. That also would conflict with fundamental princi¬ 
ples of our Government. 

The power exercised by administrative authority in the 
case of fire, famine, pestilence and war, the pardoning of 
criminal offenses, the deportation of objectionable immi¬ 
grants, also the prevention of the transportation of diseased 
animals and infected goods in obedience to the provisions 
of the police power of government is responsive to estab¬ 
lished rules of public policy. Such exceptional exercise of 
administrative authority bears no semblance whatever to 
the exercise of a discretionary power which would em¬ 
brace the essential attributes of legislation and expel the 
exercise of the judicial function with respect to the direc- 


40 


tion and control of the peaceful and lawful industrial oc¬ 
cupations of mankind amid the conflict of commercial, in¬ 
dustrial and financial forces, whose interaction involves 
those conservative elements of regulation, which for lack 
of more definite knowledge we designate as the law of 
supply and demand and of competition. 

This marks the substantial delimitation between the 
commercial power and the police power of government, 
however perplexing to the courts the distinction between 
the operation of these powers may be in concrete cases. 
United States v- E. C. Knight Co.^ 156 U. S., 13. 

The difference between prescribing rates in advance and 
correcting unreasonable charges after they have been 
charged and collected is the difference between attempting 
to direct men how to proceed aright in the conduct of their 
business affairs and punishing them after they have vio¬ 
lated express provisions of law. The former is paternal¬ 
ism—the latter is the administration of justice. The 
former is governmental imperialism—the latter is liberty 
regulated by law. This distinction is vital to our system 
of free government, for it discriminates between judicial 
authority and delegated legislative authority. As such it 
sharply defines the line of cleavage between ordered liberty 
and despotic rule. There is One Above who prejudges 
and predetermines, but that attribute does not pertain to 
mortal man. These elementary propositions appear to 
have been disregarded by the Interstate Commerce Com¬ 
mission in its struggle for autocratic power. 


41 

A JUDICIAL OPINION QUOTED. 

Mr. Prouty attempts to defend his theory by quoting Mr. 
Justice Bradley who in speaking of the right to control 
railroad charges said: 

“ But a superintending power over the highways and 
the charges imposed upon the public for their use always 
remains in the Government.” 

To assume for a moment that Mr. Justice Bradley enter¬ 
tained the idea that the governmental power of regulating 
commerce should be exercised as a dispensing power or in 
any manner not subject to judicial review as to the justice 
and reasonableness of rates charged would be to impeach 
the common sense of that eminent jurist, and to cast a 
blight upon his memory. 

Moreover it appears safe to say that it would be difficult 
to find a railroad manager in the United States who does 
not cheerfully admit the correctness of the above declara¬ 
tion of Mr. Justice Bradley. The “Artificial Man,” as the 
corporation is sometimes styled, is always subject to the 
law of his creator; and must humbly submit to the guid¬ 
ance and to the restraining and protecting care which 
such control implies. The fundamental question at issue 
is shall that control be exercised by virtue of a dispensing 
power^ or in accordance with the principles of our estab¬ 
lished system of triune government, which makes the ques¬ 
tion of right or wrong, of justice or injustice, of reason¬ 
ableness or unreasonableness depend at last upon the 
determination of “ The Judicial Power of the United 
States,” that branch of the National Government which in 
point of wisdom is pre-eminently “ Heir of all the ages, in 
the foremost files of time.” 


42 

THE BRITISH RAILWAY COMMISSION. 

Mr. Prouty declares that his proposed scheme is similar 
in character to the British Railway Commission. In this 
he is wide of the mark. The British Railroad Commission 
is a branch of the national judiciary, and its conclusions 
are strictly judicial decisions, such as the Interstate Com¬ 
merce Commission persistently repels and diligently seeks 
to avoid, in favor of the exercise of a dispensing power. 
Besides, the delimitation of legislative, administrative and 
judicial powers is not so closely drawn under the unwritten 
British Constitution as it is under the Constitution of the 
United States. The assumed analogy is without force. 

COMMISSIONER PROUTY’S ATTITUDE TOWARD 
THE RAILROADS. 

Mr. Prouty’s attitude toward the railroads of the coun¬ 
try is hostile. In his address before mentioned he disre¬ 
garded all facts as to the enormous growth of the Ameri¬ 
can Railroad System—from 70,000 miles in 1873 about 
200,000 miles in 1893—its greatly increased efficiency, the 
reduction in the average charge to nearly one-third the 
average charge imposed thirty years ago, involving a total 
reduction in freight charges of nearly two thousand million 
dollars a year, the fact that in the sixteen years of the life 
of the Commission it has not been able to prove in the 
courts the existence of a single exorbitant rate and only 
one case of unjustly discriminating rates in each two and 
a half years, and that of the complaints made to the Com¬ 
mission 97 per cent are settled through its mediatorial 
offices, whereas only 3 per cent come to a formal hearing 
before the Commission. Ignoring all these guiding facts, 
Mr. Prouty adopted the expedient of referring to certain 


43 


particular rates which appear to him to be unreasonable, 
because they have been advanced in a constant readjustment 
of rates throughout the country, ignoring concurrent re¬ 
ductions in rates. From the exceptional cases which he 
selects he predicts danger. He declares that combination 
has destroyed competition, and that therefore rates must 
become exorbitant, whereas it has been demonstrated time 
and again that the restraints which have been placed upon 
competition during the last thirty years, by association, by 
compact, and by actual combination or merger of interests 
have been compelled by the necessity of maintaining order 
in the conduct of the internal commerce of this country. 
Besides, such restraints have secured efficiency in railroad 
transportation and just and reasonable rates. These re¬ 
straints upon destructive competition have almost invariably 
been accompanied by a fall in rates. 

Not satisfied with the foregoing statements Mr. Prouty 
expresses himself in the following outburst of feeling : 

“ The railroad, the railroad combination is one of the 
most subtle and dangerous instrumentalities in effecting 
an unjust distribution of wealth by taking from the poor 
man wrongfully and giving to the rich “railway trans¬ 
portation is to-day a monopoly;” “ with respect to inter¬ 
state transportation the public has no safeguard against 
railroad monopoly;” the country is confronted by “ the 
danger which always attends monopoly, the exaction of an 
unreasonable rate ; ” the only way to control monopoly is 
to “control the charge which it exacts.” 

This is hysteria. It exhibits a spirit which expels the 
semblance of fair dealing. Such language is without the 
shadow of excuse in actual experience and is utterly 


44 


repudiated by facts patent to tlie general observation, some 
of the more important of which have herein been noticed. 

The railroads of the country from the beginning have 
been to the shipper and the traveler, as free as are the 
natural highways of commerce. The common law, the 
laws of every State, the laws of the United States and the 
usages of railroad transportation maintain that freedom. 

The pretense of Mr. Prouty that the railroads are able 
to defy the law and the public sentiment of the country re¬ 
garding established principles of right and justice is with¬ 
out any foundation in fact. Time and again the allegations 
of Commissioner Prouty and his colleagues as to unreason¬ 
able rates, or the apprehension of unreasonable rates, have 
been absolutely refuted. During its existence the Com¬ 
mission has been unable to sustain its declarations in this 
regard before the courts or before the committees of Con¬ 
gress. There is also on all sides abundant proof that the 
railroads have been forceful and efficient agencies in the 
development of the natural resources of the country, in the 
creation of new and far-reaching elements of competition 
in industry, in trade and in transportation ; in the distribu¬ 
tion of wealth ; in furnishing occupation to labor; in the 
enhancement of wages, and in promoting the general wel 
fare. 

THE INTERSTATE COMMERCE COMMISSION 
ANTAGONIZES THE FEDERAL JUDICIARY. 

In its various attempts during the last ten years to ac¬ 
quire dispensing power the Interstate Commerce Com¬ 
mission has persistently antagonized the Federal judiciary. 
Notwithstanding the fact that the law creating it does not 




45 


require that any one of its members shall be a lawyer, the 
Commission has not hesitated to assert its opinions as 
against that of the great lawyers of the Supreme Court, 
both in regard to questions of fact, and to legal and con¬ 
stitutional questions, as well as in regard to questions of 
public policy which especially concern “The Judicial 
Power of the United States.” In twenty cases adjudicated 
since it was organized the Commission has resorted to the 
courts for judicial aid in the enforcement of its autocratic 
and un-American pretentions and in such instances it has 
been overruled not only on legal and constitutional grounds, 
but also on commercial and economic considerations. The 
orders of the Commission which have failed to secure the 
approval of the courts have been clearly proved to be 
illegal orders—completely outside the powers conferred 
upon it by law. It is for this reason mainly that its various 
appeals to Congress for additional powers have been dis¬ 
regarded. 

The Commission has also strenuously attempted to usurp 
the powers of the judiciary, to override the judiciary and 
to circumvent the judiciary. On the other hand the 
courts have patiently pointed out the excellent and benefi¬ 
cent features of the Act to Regulate Commerce and the 
powers of the Commission for good, and have manifested 
an earnest desire to co-operate with the Commission in 
effectuating the exercise of its undoubted authority in the 
direction of beneficent regulation. But the Commission 
has been persistent in its efforts to secure autocratic dis¬ 
pensing power and to free itself from judicial restraint. 
In reply to a resolution of the Senate dated April 23, 1900, 


46 


the Commission explained that the principal cause of its 
ill-success in the courts had arisen from the difference of 
views entertained by the Commission and by the Supreme 
Court of the United States on a fundamental principle of 
government. (Senate Document No. 319, 56th Congress, 
1st session). The charge of undue modesty, as against 
the Commission, has never been sustained in the courts or 
elsewhere. 


CONCLUSION. 

It was stated at the beginning that the proposition to 
invest the Interstate Commerce Commission with the auto¬ 
cratic power to prescribe rates for transportation services 
in this country, is an expression of current populistic 
thought, fraught with danger to the commercial interests 
and the political integrity of this country. It was also 
premised that the evils which would thus be incurred 
would greatly exceed in magnitude any real or imaginary 
evils which the proposed expedient is intended to remove. 
An attempt has been made to prove the correctness of 
these statements. 

At first the Commission, guided by Judge Cooley, de¬ 
clared that the creation of a dispensing power “ would not 
be consistent with sound principles of government.” Sub¬ 
sequently the Commission repudiated that doctrine, and 
has repeatedly asked Congress to confer upon it such 
power. This proposition has been steadily refused. The 
history and present status of the American Railroad Sys¬ 
tem as a public utility constitutes the most striking refuta¬ 
tion of this conception whether it be called populism, 


47 


paternalism, anti-trust, anti-monopoly or state-socialism. 
With its 200,000 miles in length, a traffic of over one 
thousand million tons and over six hundred million pas¬ 
sengers carried annually, there has not been proved in the 
courts a single case of exorbitant rates during the sixteen 
years of the existence of the Commission, and only one 
case of unjust discrimination in each two and a half 
years. At the same time the facilities for transportation 
have been wonderfully improved and rates have been 
greatly reduced. This indisputable record affords a splen¬ 
did vindication of the faith of the fathers in the conserv¬ 
atism which inheres in the untrammelled interaction of 
forces. It is a faith which may appear shadowy to the 
populistic mind, beguiled by the idea of governmental 
omniscience, but it is conformable to the unalterable and 
potential laws of trade which governments must protect, 
and with which they cannot safely interfere without tres¬ 
passing upon human rights. 

The subject of governmental rate making involves im¬ 
portant constitutional questions, which cannot here be dis¬ 
cussed, but may be mentioned : 

1. It is inconceivable that a power of government so 
enormous that it could eliminate the “Judicial Power of 
the United States” and practically supersede any actual 
participation by the legislative and executive departments 
of the Government in the work of regulating the internal 
commerce of the country, as has been seriously proposed, 
could possibly be brought into being except through a 
radical change in the Constitution of the United States. 

2 . It is inconceivable that the delegation of legislative 


48 


power, so extensive as that proposed by the Interstate 
Commerce Commission, could possibly be conferred except 
by constitutional amendment. The rule of constitutional 
law that Congress has no power to delegate its legislative 
authority is a recognized political axiom. This was clearly 
enunciated by Mr. Chief Justice Marshall in Weyman vs. 
Southard^ lo Wheaton, p. 42. 

In the face of the outcry against monopoly the fact 
stands that we live in an age of unparalleled material 
prosperity due to the accomplishment of great things 
through great agencies. The most marked success of the 
National Government has been achieved through its com¬ 
mercial policy. In the light of these irrefutable facts, the 
representations of populistic advocates of reform in this 
regard are a jeremiad on prosperity, and a satire on benefi¬ 
cent results. They tend to disturb a faith in the be¬ 
neficence of our political institutions which should be as 
an anchor to every patriotic soul. 

It is not denied, but is strenuously maintained, that evils 
affecting our transportation system should be arrested by 
means of wholesome and efficient governmental regulation. 
As stated in the beginning, the main object of this paper 
is to oppose asserted remedies which are deemed to be 
revolutionary, grossly excessive and prejudicial to the 
public interests. Ample power exists under our present 
form of government for the correction of evils incident to 
our transportation system, which may be properly the sub¬ 
ject of governmental concernment. This has been proved 
by the experiences of seventy years. 

The wild theory of conferring autocratic power upon 


49 


an administrative board, and the affiliated idea of confer¬ 
ring judicial authority upon administrative bodies, sets at 
defiance the fundamental principle of democratic govern¬ 
ment. Such propositions, as a rule, involve the expedient 
of depriving the judiciary of the power to determine the 
reasonableness of contracts in restraint of, or regulative of, 
trade, a power which lies at the basis of all commercial 
law, and is essential to the maintenance of the orderly 
conduct ol the business interests of the country. All 
schemes of this sort involve the creation of a dispensing 
power of government which is antagonistic to our political 
system. This would constitute a recrudescence of the 
impracticable. As already shown, a dispensing power, 
not only vitiates, but extinguishes the very essence of free 
government. It has been repeatedly tried, and in all ages 
has been proved to be incompatible with the exigencies of 
liberty, and the protection of human rights. 

And yet the spirit of populism and of state-socialism is 
abroad in the land and finds expression in favor of govern¬ 
mental supervision of the commercial and industrial affairs 
of the country. Such un-American and revolutionary ideas 
constitute an assault not only upon the structural features^ 
but upon the very genius of our governmental institutions. 
To a greater or less extent they pervade all parties and all 
classes of our citizens, and apparently for the reason that 
the antiquated character of the expedients proposed and 
their proven impracticability have not been properly con¬ 
sidered. 

The revolutionary idea of governmental supervision and 
administration of the commercial and industrial affairs of 


50 


the country involving the creation of a Dispensing Power 
pervades the entire anti-trust and anti-monopoly pro¬ 
gramme of the present day, in the face of the fact that the 
country has enjoyed an unprecedented degree of prosperity 
under the government as now constituted. 

The people who advocate such impractical theories seem 
to lose sight of Hamilton’s exalted conception of human 
government, namely, that it should not only be able to 
govern the people beneficially, but also that it should be 
able to govern itself. This was a problem of the ages, to 
the solution of which the men of 1787 added the finest 
contribution. Their conclusion was firmly based upon the 
incontrovertible fact that human law and human govern¬ 
ment is essentially a science of adaptations, wrought out 
by human experiences, and not the product of any assumed 
eternal fitness of things. 


In treating of the important questions to which this 
paper relates, attention has been directed particularly to 
their political aspects as indicated by commercial and eco¬ 
nomic conditions. Such considerations naturally precede 
the legislative and judicial questions involved. As re¬ 
cently remarked by Judge Coit of the P'ederal judiciary 
before the American Bar Association, “ society in progress¬ 
ive nations is always in advance of the law. The evolu¬ 
tion of law follows and never precedes the evolution of 
society.” In this view the consideration of the political 
effects of the revolutionary proposition to establish a dis¬ 
pensing power in the United States is of vastly greater 
importance than any or all of the political issues upon 


51 


which the people of this country are now divided. It 
overshadows all other political questions which agitate the 
public mind. Hence it appears that in a country like 
ours, where great questioning is determined in the light of 
reflective judgment, the first step toward the philosophical 
consideration of the proposition to establish a dispensing 
power in the United States is to make the whole matter 
the subject of a thorough and impartial congressional in¬ 
vestigation, having regard particularly to the commercial, 
economic and political questions involved. 

This article has been prepared for the purpose of indicat¬ 
ing certain questions involved in the broad field of inquiry 
to which it relates, with special reference to the American 
Railroad System and our internal commerce. If it shall in 
any degree tend to promote such investigation as that sug¬ 
gested the object had in view will have been fully accom¬ 
plished. 

No. 1831 F St. N. W., 

Washington, D. C., 

October 17, 1903. 




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